CANADA: Planning for health care in old age

Patient ponders long-term health insurance plan, write David Cruise and Alison Griffiths TORONTO (The Star), July 23, 2006: After a certain age, all it takes is a persistent cough, a nasty fall or news that an acquaintance or family member has been stricken with cancer to push one's thoughts in the direction of future health care security. In Joanne T.'s case, a chat with her adviser was the catalyst. He predicts she will have a surplus of $100,000, at age 80, based on her current spending patterns and has recommended a long-term health care insurance plan from RBC that carries an annual premium of around $4,000. Our patient isn't too concerned about the near term. "I am in good health, have 12 siblings, 10 of whom are still alive (from 55 to 80 years old) and are in relatively good health," she writes. "So I feel my gene pool is pretty good!" Still, with no children of her own, Joanne T. is concerned that a time will come when she needs help. Tilting somewhat against an often raised, future spectre of the aged, stacked like cordwood in hospital corridors with no services beyond a daily bed pan cleaning and bowls of Jello for meals, is Sandra Foster. Foster, financial adviser, estate planner and author of the best-selling financial book, You Can't Take It With You, has given considerable thought to the costs of care in our golden years. "I went hunting for what is available to people now through the Ministry of Health and Long Term Care," says Foster. "Basic or standard accommodation in a provincial long-term care facility costs $1,480.99 monthly. Semi-private is $1,724.32, and if you want a private room it will cost you just over $2,000 a month. "If you go to a private facility, those costs roughly double." Using these figures, it is clear that Joanne can comfortably afford a private room out of her pension income of $34,000, with money left over the little extras that add enjoyment to life. And, assuming she does not spend much of her RRIF income (which she currently doesn't need), she will also be able to afford a private facility with meals and round-the-clock care, especially after selling her mortgage-free condo, now valued at $230,000. "She's actually got a lot of options," points out Foster. "She's ahead of the baby boom curve so it really depends on where she wants to live out her senior years." Still, Foster recognizes that fear of the what-ifs drive most of us to buy insurance. Things look good for Joanne T. now, but what if government services to the aged are cut back, what if costs skyrocket and what if she needs some form of care that is outside what the government will provide? Before she buys, Foster urges our patient to look deeply into the policy provisions. "One area that might be of benefit to her is if they begin to co-ordinate the care." This could be particularly useful to Joanne T. who has no children. Co-ordinating home care for an elderly person can involve half a dozen service providers, from house cleaners to nurses, which can be confusing and frustrating to someone well advanced in years. "In some (disability) policies, the insurance companies are starting to figure out it is more cost effective to manage the care. My opinion is if insurance companies in the future have enough people under claim for long-term home care, they may get into the business of co-ordinating care." Foster says there are many wrinkles that must be investigated before leaping to invest $4,000 a year, not the least of which is the stability of that premium. "Some companies guarantee the premium for a certain period of time, or they might guarantee there is a cap on premium increases. And some you pay for the rest of your life whereas others you might pay for the next 20 years." Other important questions to ask before buying include the amount of benefits monthly, is there a cap on payments and how long she has to wait before those benefits kick in? Also, once Joanne T. becomes a claimant, does the policy cover supplemental care at home, care in a long-term facility or both? And what about qualifying to collect those benefits? The policy will state the requirements, which can include the inability to dress oneself or perform the functions of daily living such as bathing or even thinking clearly. She may reach the age of 90 and be fully functioning except for cooking meals. That gap in daily living skills might not qualify to collect on her policy. Not only does Joanne T. need to explore the fine print with her adviser, but she also needs to ask for comparisons with other policies on the market. In the past, advisers were linked to a single company, now many sell products from a number of different companies. In the meantime, Foster suggests Joanne take a good look at her condo. A little planning now for accessibility will diffuse the financial hit from retrofitting all at once. Making the home walker and/or wheelchair friendly now will make life far less stressful 15 or 20 years from now. Foster would also like Joanne T. to delve into the $100,000 surplus, projected by her advisor, at age 80. "Í'm really concerned about this. What is it? She doesn't understand where it is coming from. This is a really typical example of miscommunication. It happens all the time where terms are used and the adviser doesn't explain what they're saying beyond, use some of the money to buy insurance." One thing is certain, the price of long-term care rises sharply as one ages, so it makes sense to purchase it long before you need it. However, because of her age, assets and modest style of living, Foster isn't sure our patient has a clear need. She warns Joanne T. against jumping into a policy just because an adviser has spotted assets surplus to her current needs. Questions and comparison shopping come first. Speaking of insurance, a few weeks ago we covered travel insurance and credit cards. The emergency out-of-province/country travel medical insurance provided by the CIBC Gold Visa card is a maximum of $1,000,000 for trips up to 31 days for those aged 64 or under, not $500,000, as we wrote. Copyright Toronto Star Newspapers Limited.